Q&As: How to Keep Control of a Fast-Growing Business

Q: Is it easier to sustain fast growth in certain businesses?

A: Generally, businesses with very standard products serving large national or international markets can sustain the demands of fast growth more easily than firms offering non-standard or customized products that serve small markets. In addition, service businesses, especially those with more complex or personalized services, are more difficult to grow than product businesses.

It is difficult to maintain a consistent level of quality and service for custom or special products when a company is experiencing rapid expansion. And, if the potential market is small, a firm may have to expand into additional markets to sustain high levels of growth.

On the other hand, high-growth companies that produce standard products for large domestic or international markets are more likely to attract well-financed national or international competitors.

Q: When is fast growth too fast?

A: Sustainable fast growth must also be controlled fast growth.

No matter how fast your company is growing, you need to set aside time to keep your business plan up to date. Your projected cash flow should allow for enough room in your credit line at the bank to cover unforeseen or underestimated expenses.

Your profit and loss projections should be sufficiently up to date so that they accurately represent your current and projected cost structure. You need to feel relatively confident about the abilities of your key managers. You should also feel confident about the quality of your product and/or service. And perhaps most of all, you should try to avoid becoming “burned out.”

Q: Does a fast-growth business require a different type of bank?

A: Fast-growth businesses inherently involve more risk than other types of businesses. Because of this factor, some small, local, or conservative banks may not see an upside to financing your businesses’ growth. If your business hits its targets, your lending needs may outpace your bank’s legal lending limits.

When you approach a bank, find out what types of businesses it typically finances. If its clientele has been restricted to the local funeral parlor, barber, and corner grocery store, it won’t be your best bet if you are seeking financing for a high-flying, international concern which manufactures a highly technical product.

I have found, however, that in large money center banks there are often different lending groups that have very different philosophies and targets. So even within your current bank there may be more than one option.

Q: What problems typically beset fast-growth firms?

A: Fast-growth firms are likely to encounter many of the problems less growth-oriented firms experience, And when those problems do occur, they tend to run deeper and occur more frequently and even simultaneously.

Loss of control is often at the root of these problems, which might strike company wide if a firm experiences a cash shortage because of poor cash forecasting. Or the problems might be limited to one or two functional areas if a manager becomes overworked, is in over his or her head, or is unable to keep up the pace.

Q: What should I do if I feel growth is “out of control”?

A: First, try to get your cash flow under control. Without cash or credit, your options are severely limited.

Next, project cash flow out carefully for a 12-month period. Make sure your profit and loss projections for the next year or so are up to date.

Compare your profit margins to competitors – are they in line? Evaluate the direction your business is headed and discuss it with your managers. Is your direction in line with your business strategy? Is it in sync with your current strengths and weaknesses?

Finally, evaluate each functional area of your business and determine its ability to handle future growth. Fast growth will amplify any weaknesses in your company. Make sure each component of your organization is as strong as it can possibly be.

About Bob Adams

Bob Adams is a Harvard MBA serial entrepreneur. He has started over a dozen businesses including one that he launched with $1500 and sold for $40 million. He has written 17 books and created 52 online courses for entrepreneurs. Bob also founded BusinessTown, the go-to learning platform for starting and running a business.